The U.S. dollar slipped on Monday as traders prepared for a busy week of central bank meetings. The highlight will be the U.S. Federal Reserve, where markets have already priced in an interest rate cut, although a divided committee still introduces uncertainty.
In addition to the Fed’s decision on Wednesday, policy meetings are also scheduled in Australia, Brazil, Canada, and Switzerland. No major rate changes are expected outside of the United States.
The euro inched up to $1.1663, continuing to trade in a tight range that has held since June. The yen, which stabilized after a sharp decline in November, edged slightly higher to 155.21 per dollar.
Analysts anticipate what they call a “hawkish cut.” This would mean that while the Fed lowers rates, the statement, forecasts, and comments from Chair Jerome Powell may point to a higher threshold for further easing. Such a stance could support the dollar if it leads investors to scale back expectations for two or three rate cuts next year. However, mixed views among policymakers could complicate the message.
BNY strategist Bob Savage noted that the meeting could see dissents from both hawkish and dovish members. The Federal Open Market Committee has not seen three or more dissents at a single meeting since 2019, and such occurrences have been rare over the past three decades.
Australian Dollar Hits Multi-Month High
The Australian dollar climbed to a two-and-a-half-month high of $0.4469. It has strengthened through key technical levels, supported by markets pulling back from earlier expectations of rate cuts. The Reserve Bank of Australia meets on Tuesday following a series of strong readings on inflation, GDP, and household spending. Futures markets now imply that the next rate move is likely higher, potentially as early as May.
ANZ analysts said they now expect the RBA to keep rates at 3.60% for an extended period, revising earlier projections for a cut.
Loonie Supported by Strong Labour Data
A similar trend in Canada pushed the Canadian dollar to a 10-week high on Friday. Strong labor data reinforced expectations that the Bank of Canada will hold rates steady at Wednesday’s meeting. Markets have fully priced in a rate hike by December 2026. On Monday, the loonie traded at C$1.3819.
Other Major Currencies Hold Steady
The New Zealand dollar held at $0.5784, just below resistance near $0.58. The Swiss franc strengthened 0.1% to 0.8034 per dollar, supported by subdued inflation that is expected to keep interest rates at 0% for some time.
Sterling traded slightly above its 200-day moving average at $1.3339, while China’s yuan remained stable at 7.068 per dollar.
In Brazil, the central bank is widely expected to keep rates unchanged at 15%. A cut could be possible next quarter.
